**Exhibit 4.5**

**EMPLOYMENT AGREEMENT OF ELLEN MCDONALD**

** **

**ÆTERNA ZENTARIS INC.**

** **

**Dated May 1st, 2007**

 

----

 

**EMPLOYMENT AGREEMENT**

 
| **BETWEEN:** | **ÆTERNA ZENTARIS INC.,**a Corporation duly  incorporated, having its head office at 1405 Parc-Technologique Blvd., Québec,  QC GIP 4P5, |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------|
|         |                                                                                                                                               |
|         |                                                                                                                                               |
|         | (hereinafter the **“Corporation”**)                                                                                                      |
|         |                                                                                                                                               |
|         |                                                                                                                                               |
| **AND:**     | **ELLEN MCDONALD,****MBA**.  domiciled at [civic address redacted for privacy reasons], New Jersey, USA                                            |
|         |                                                                                                                                               |
|         |                                                                                                                                               |
|         | (hereinafter the **“Executive”**)                                                                                                        |

 

**SECTION 1 – PURPOSE**

 

1.1           TheCorporation wishes to employ the Executive as its Senior Vice President,Business Operations and Chief Business Officer, starting on May 2nd,2007. The Executive is willing to be employed by the Corporation, on the termsand conditions set forth herein in this Employment Agreement (the **“Agreement”**).****The Executive shall report to thePresident and Chief Executive Officer of the Corporation.

 

**SECTION 2 – DUTIES**

 

2.1           TheExecutive agrees to devote his full business time to the Corporation, to makeevery effort necessary to perform adequately the duties that are assigned tohim and to act in the best interests of the Corporation at all times. TheEmployee shall refrain from any activity that could be prejudicial to theCorporation’s interests. In performing his duties with the Corporation, the Executiveshall act faithfully and honestly at all times.

 

2.2           TheExecutive shall carry out his duties from New Jersey, USA. However, theExecutive acknowledges that his position will require traveling, including toCanada and Europe, and the Executive agrees to devote the necessary andreasonable time to such traveling.

 

2.3           TheExecutive declares that he has no obligation toward any person, including hisformer employers, that would be incompatible with this Agreement or that couldbe an impediment to the performance of his duties with the Corporation.

 

----

 

2.4           The Executive agrees tocomply with all the instructions, policies and/or rules that are establishedverbally or in writing by the Corporation.

 

2.5           The Executive shall beentitled to sit on a board of directors of another corporation, solely with theprior written authorization of the Board. The Board agrees that the Executivemay maintain his current board assignments (i.e., with Cobalis Corporation) butwill resign such position as soon as it is appropriate or necessary.

 

**SECTION 3– COMPENSATION**

** **

3.1           Salary

 

The Corporation shall pay the Executive, for the duration of thisAgreement, a base annual salary (the **“Base Salary”**)****of THREE HUNDRED AND TWENTY-FIVETHOUSAND US DOLLARS****(US$325,000.00),payable in accordance with the Corporation’s standard payroll practice. SuchBase Salary shall be reviewed annually and may be increased in accordance withthe Corporation’s policy.

 

3.2           Bonus

 

During the term of this Agreement, the Executive shall be eligible toreceive an annual lump sum cash bonus (the **“Annual Bonus”**) in respectof each full or partial fiscal year of the Corporation, which is from January 1to December 31. The Annual Bonus for the 2007 fiscal year, which shall beprorated, shall be equal to an amount representing thirty- five (35%) of theBase Salary. If an Annual Bonus is to be paid hereunder in respect of a periodthat is a partial fiscal year, such Annual Bonus shall be prorated for servicethrough the Executive’s date of termination. In all cases, the Executive’seligibility for such Annual Bonus is conditional upon the attainment ofobjectives, which shall be mutually agreed upon within one month of thecommencement of the Executive’s employment for year 2007 and thereafter yearly.According the Corporation’s policy, the granting of Annual Bonus is based uponan assessment of each individual’s performance as well as the performance ofthe Corporation and requires Board approval.

 

3.3           Stock Options

 

Subject to regulatory approval, the Corporation shall grant to theExecutive, no later than the date of signature of this Agreement, 25,000options under the Corporation’s Stock Option Plan (the **“Plan”**).****These stock options shall vestequally over a period of three (3) years from the date of the originalgrant. The said options, the exercise price, the period during which they maybe exercised and the other terms and conditions attaching to their exerciseshall be subject to the terms and conditions of the Plan.

 

3.4           Signing Bonus

 

The Executive shall receive a signing bonus, of an amount representingthe value of 2,500 Corporation’s Common Shares. This amount will be grossed upto take into account the income taxes and will be payable only if the Executiveacquire the same

 

2

----

 

number of Common Shares of the Corporation on the market, within thefirst month following the signature of this Agreement, subject to compliancewith the Corporation’s insider trading and blackout policies and all relevantsecurities regulations.

 

3.5           Car Allowance

 

The Corporation shall pay the Executive an annual taxable car allowanceof TWENTY THOUSAND US DOLLARS (US$20,000.00). In addition, the Corporation willassume all related operating costs of the vehicle (including insurance,registration, maintenance, repairs and fuel).

 

3.6           Business Expenses

 

The Corporation shall reimburse the Executive, upon presentation ofvouchers, for reasonable entertainment, traveling and other expenses incurredby him on behalf of the Corporation, in accordance with the Corporation’spolicies and rules.

 

**SECTION 4****–****VACATION**

 

The Executive shall be entitled to paid annual vacation of four (4) weeks,in accordance with the Corporation’s policy, which vacation is to be taken attimes prearranged with the Corporation. Vacation must be taken during the yearand shall not be cumulative. The full vacation for 2007 is vested for theExecutive upon execution of this agreement.

 

**SECTION 5****–****GROUP INSURANCE**

 

5.1           Medical/DentalInsurance, Life and Disability Insurance 

 

TheCorporation shall pay the monthly premium for family benefits plan insuranceaccording the Corporation’s existing plan Insurance

 

**SECTION 6****–****DURATION AND TERMINATION**

** **

6.1           Duration

 

This contractis for an indeterminate term.

 

6.2           Automatic termination

 

The Executive’s employment shall terminate automatically, without theCorporation being bound to pay any compensation whatsoever, upon the death ofthe Executive or the date upon which his resignation becomes effective.

 

The Executive’s employment may also be terminated by the Corporationfor cause upon simple notice in writing transmitted to the Executive, withoutthe Corporation being bound to pay any compensation whatsoever, in thefollowing cases, hereinafter referred to as **“Cause”**:

 

3

----

 

(a)           If the Executive isdeclared bankrupt or insolvent or makes an assignment of his property or isplaced under protective supervision, which situations the Executiveacknowledges to be incompatible with the continuation of his employment.

 

(b)           If the Executivebecomes physically or mentally disabled to such an extent as to make him unableto perform his duties normally and adequately for an aggregate of six (6) monthsduring a period of twelve (12) consecutive months. In such a case, theExecutive may continue to benefit under short-term and long-term disabilityinsurance plans, subject to the terms of such plans, if any.

 

(c)           If the Executivebreaches the terms of this Agreement.

 

(d)           If the Executive commitsany fraud, theft, embezzlement or other criminal act of a similar nature.

 

(e)           If the Executive hascommitted serious misconduct or willful negligence in the performance of hisduties.

 

(f)            If the Executiverefuses or fails to follow reasonable directives of the Corporation.

 

(g)           If the Executive’sdemonstrates willful or reckless conduct causing material damage to theCorporation or the Corporation’s business.

 

(h)           If the Executivemisuses or abuses alcohol, drugs or controlled substances.

 

6.3           Termination withoutCause

 

The Corporation may also terminate the Executive’s employment, withoutcause, by paying him the following:

 

(a)           If the Executive’semployment is terminated by the Corporation on or before the date that is thetwelve (12)-month anniversary of the date of this Agreement, an amountequivalent of months worked of:

 

(i)            the Executive’s annualBase Salary;

 

(ii)           the annualized AnnualBonus received or to receive by the Executive for 2007; and

 

(iii)          the cost of the benefitswhich were in force at the time of termination of the Executive’s employment,calculated on a yearly basis, including the car allowance but excluding therelated operating costs. However, Stock Options are expressly excluded fromthis provision and the Executive shall be treated, in this regard, inaccordance with the terms of the Plan.

 

4

----

 

(b)           If the Executive’semployment is terminated by the Corporation after the date that is the twelve(12)-month anniversary of the date of this Agreement:

 

(i)            an amount equivalentto twelve (12) months of the Executive’s annual Base Salary;

 

(ii)           An amount equivalent tothe Annual Bonus received by the Executive for the last completed fiscal yearprior to the termination date calculated on a yearly basis; and

 

(iii)          An amount equivalent totwelve (12) months of the cost of the benefits which were in force at the timeof termination of the Executive’s employment, calculated on a yearly basis,including the car allowance but excluding the related operating costs. However,Stock Options are expressly excluded from this provision and the Executiveshall be treated, in this regard, in accordance with the terms of the Plan.

 

(c)           The Executiveacknowledges that the said payments are fair and sufficient and, in considerationof the Corporation giving him such payments in the event of the termination ofhis employment without cause, the Executive shall grant the Corporation and itsdirectors, officers, employees, shareholders, representatives and agents, andthe directors, officers, employees, shareholders, representatives and agents ofany affiliate of the Corporation, a full and final release and discharge fromany and all claims, past, present or future, that he has or may have, arisingdirectly or indirectly from the termination of his employment, whether forprior notice of termination, severance pay, damages in lieu thereof or for anyother reason.

 

6.4           Resignation

 

In the event that the Executive wishes to terminate his employment, heshall give the Corporation prior written notice of at least 6 weeks.

 

**SECTION 7 – TERMINATION OF EMPLOYMENT FOLLOWING A CHANGEOF CONTROL**

 

7.1           If the employment ofthe Executive is terminated by the Corporation within twelve (12) monthsfollowing a Change of Control, without Cause by the Corporation or by theExecutive for Good Reason, the whole as defined in Appendix 1, the Executiveshall receive the following:

 

(a)           An amount equivalent toeighteen (18) months of his annual Base Salary;

 

5

----

 

(b)           An amount equivalent to 1.5 times the Annual Bonus, if any, which the Executive wouldhave been entitled to receive in the year during which the Change of Controloccurred; and

 

(c)           An amount equivalent to eighteen (18) months of the cost of thebenefits which were in force atthe time of termination of the Executive’s employment, calculated on a yearlybasis, including the car allowance, but excluding operating costs. However,Stock Options are expressly excluded from this provision and the Executiveshall be treated, in this regard, in accordance with the terms of the Plan.

 

**SECTION 8****–****NO COMPETITION, NO SOLICITATION AND LOYALTY**

 

8.1           The Executive shall not compete with the Corporation, directly norindirectly. He shall not participate in any capacity whatsoever in a businessthat would directly or indirectly compete with the Corporation, namely oneinvolved in the development and commercialization of the specific endocrinetherapies and oncology treatments which the Corporation is actively developing,including, without limitation, as an executive, director, officer, employer,principal, agent, fiduciary, administrator of another’s property, associate,independent contractor, franchisor, franchisee, distributor or consultantunless such participation is fully disclosed to the Corporation and approved inwriting in advance by the Board. In addition, the Executive shall not have anyinterest whatsoever in such an enterprise, including, without limitation, asowner, shareholder, partner, limited partner, lender or silent partner. This nocompetition covenant is limited as follows :

 

8.1.1                **As to the time period,**to the duration of the Executive’s employmentand for a period of one (1) year as of the date of termination of hisemployment;

 

8.1.2                **As to the geographical area,**the territory in which aspecific product had been actively exploited by the Corporation during the twoyears preceding the termination date. For purposes of this clause, theCorporation is deemed to have actively exploited such territory for suchproduct if, during the two (2) years immediately preceding the terminationdate:

 

(i)            Distribution rights for this product weregranted to a distributor of the Corporation, pursuant to a distributionagreement (exclusive or non-exclusive) except if such distribution agreementceased to have effect, prior to the termination date, with the Corporation’sconsent and provided that the Corporation did not actively search for otherdistributors for the territory covered by this Agreement; or if

 

(ii)           The Corporation has completed phase II clinical development work for thisproduct in this territory, or searched for commercial partners or applied toprotect its intellectual property rights in relation to the product

 

6

----

 

and its use, including patent applications in relation to the productor its use, which applications referred to these territories.

 

8.1.3        **As to the nature of the****activities****,**to duties oractivities which are identical or substantially similar to those performed orcarried on by the Executive during the twenty-four (24) months preceding thetermination of his employment.

 

8.2           Theforegoing stipulation shall nevertheless not prevent the Executive from buyingor holding shares or other securities of a Corporation whose securities arepublicly traded on a recognized stock exchange where the securities so held bythe Executive do not represent more than five percent (5%) of the voting sharesof such Corporation and do not allow for its control.

 

8.3           TheExecutive also undertakes, for the same period and in respect of the sameterritory referred to hereinabove in sub-sections 8.1.1 and 8.1.2, not tosolicit clients of the Corporation, directly or indirectly, not to permit theuse of his name in order to solicit said clients or do anything whatsoever toinduce or to lead any person to decide to put an end, in whole or in part, tohis business relations with the Corporation.

 

8.4           TheExecutive also undertakes, for the same period and in respect of the sameterritory referred to hereinabove in sub-sections 8.1.1 and 8.1.2, not toinduce, attempt to induce or otherwise interfere in the relations which theCorporation has with its distributors, suppliers, representatives, agents andother parties with whom the Corporation deals.

 

8.5           TheExecutive also undertakes, for the same period and in respect of the sameterritory referred to hereinabove in sub-sections 8.1.1 and 8.1.2 not toinduce, attempt to induce or otherwise solicit the personnel of the Corporationto leave their employment with the Corporation nor to hire the personnel of theCorporation for any enterprise in which the Executive has an interest.

 

8.6           TheExecutive acknowledges that the provisions of this section 8 are limited as tothe time period, the geographic area and the nature of the activities to whatthe parties deem necessary to protect the legitimate interests of theCorporation, while allowing the Executive to earn his living.

 

8.7           Nothingin this section shall operate to reduce nor to extinguish the obligations ofthe Executive arising at law or under this contract which survive at thetermination of the contract in reason of their nature and, in particular,without limiting the foregoing, the Executive’s duty of loyalty and obligationto act faithfully and honestly.

 

**SECTION 9****–****CONFIDENTIALITY**

 

9.1           TheExecutive acknowledges that he has received and will receive or conceive, in carryingon or in the course of his work during his employment with the Corporation, confidentialinformation pertaining to the activities, the technologies, the operations and

 

7

----

 

the business, past, present and future, of the Corporation or itssubsidiaries or related or associated companies which information is not in thepublic domain. The Executive acknowledges that such confidential informationbelongs to the Corporation and that its disclosure or unauthorized use could beprejudicial to the Corporation and contrary to its interests.

 

Accordingly, the Executive agrees to respect the confidentiality ofsuch information and not to make use of or disclose or discuss it to or withany person, other than in the course of his duties with the Corporation,without the explicit prior written authorization of the Corporation.

 

This undertaking to respect the confidentiality of such information andnot to make use of or disclose or discuss it to or with any person shallcontinue to have full effect notwithstanding the termination of the Executive’semployment with the Corporation, so long as such confidential information doesnot become public as a result of an act by the Corporation or a third partywhich act does not involve the fault of one its Executives.

 

9.2           Theterm “confidential information” includes among other things:

 

9.2.1        products,formulae, processes and composition of products, as well as raw materials andingredients, of whatever kind, that are used in their manufacture;

 

9.2.2        technicalknowledge and methods, quality control processes, inspection methods,laboratory and testing methods, information processing programs and systems;manufacturing processes, plans, drawings, tests, test reports and software;

 

9.2.3        equipment,machinery, devices, tools, instruments and accessories;

 

9.2.4        financialinformation, production cost data, marketing strategies, raw materialssupplies, suppliers, staff and client lists and related information, marketingplans, sales techniques and policies, including pricing policies, sales anddistribution data and present and future expansion plans; and

 

9.2.5        research,experiments, inventions, discoveries, developments, improvements, ideas,industrial secrets and “know-how”.

 

9.3           The Executiveundertakes to keep the terms of this Agreement confidential.

 

**SECTION 10****–****OWNERSHIP OF INTELLECTUAL PROPERTY**

 

10.1         TheExecutive hereby assigns and agrees to assign to the Corporation all hisintellectual property rights as of their creation and to make full and promptdisclosure to the Corporation of all information relating to anything made ordesigned by him or that may be made or designed by him during the period of hisemployment, whether alone or jointly with other persons, or within a period oftwo (2) years following the termination

 

8

----

 

of his employment and resulting from or arising out of any workperformed by the Executive on behalf of the Corporation or connected with anymatter relating or possibly relating to any business in which the Corporationor any of its subsidiaries or related or associated companies is involvedunless specifically released from such obligation in writing by the Board.

 

In addition, the Executive renounces all moral rights in any documentor work realized during the period of his employment. The Executiveacknowledges that the Corporation has the right to use, modify or reproduce anydocument or work realized by the Executive, at its entire discretion, withoutthe Executive’s authorization and without his name being mentioned.

 

10.2         Atany time during the period of his employment or after the termination of hisemployment, the Executive shall sign, acknowledge and deliver, at theCorporation’s expense, but without compensation other than a reasonable sum forhis time devoted thereto if his employment has then terminated, any documentrequired by the Corporation to give effect to section 10.1, including patentapplications and documents evidencing the assignment of ownership. TheExecutive shall also provide such other assistance as the Corporation may requirewith respect to any proceeding or litigation relating to the protection ordefense of intellectual property rights belonging to the Corporation.

 

10.3         This section shall bebinding on the Executive’s heirs, assignees and legal representatives.

 

**SECTION 11****–****OWNERSHIP OF FILES AND OTHER PROPERTY**

 

11.1         Anyfile, sketch, drawing, letter, report, memo or other document, any equipment,machinery, tool, instrument or other device, any diskette, recording tape,compact disc or software or any other property which comes into the Executive’spossession during his employment with the Corporation, in the performance or inthe course of his duties, regardless of whether he has participated in itspreparation or design, how it may have come into his possession and whether ornot it is an original or a copy, shall at all times remain the property of theCorporation and, upon the termination of the Executive’s employment, shall bereturned to the Corporation or its designated representative before theExecutive leaves his place of work. The Executive may not keep a copy or giveone to a third party.

 

**SECTION 12****–****TERMINATION OF PRIOR CONTRACTS**

 

12.1         Asof the effective date hereof, this Agreement supersedes and cancels any prioragreement, verbal or written, with respect to the Executive’s employment withthe Corporation.

 

**SECTION 13****–****AMENDMENT OF THE AGREEMENT**

 

13.1         To be valid, anyamendment to this Agreement must be confirmed in writing by the Corporation andby the Executive.

 

9

----

 

**SECTION 14 – NOTICES**

 

14.1       Anynotice given hereunder shall be given in writing and sent by registered orcertified mail or hand delivered. If such notice is sent by registered orcertified mail, it shall be deemed to have been received five (5) businessdays following the date of its mailing if the postal services are workingnormally. If such is not the case, the notice must be hand delivered or servedby bailiff, at the discretion of the sender. In the case of hand delivery orservice, the notice shall be deemed to have been received the same day. It isagreed that if the delivery date is a non-business day, the notice shall bedeemed to have been received on the following business day.

 

**SECTION 15****–****ELECTION OF DOMICILE**

 

15.1       Forthe purposes of the exercise of any rights flowing from this Agreement and theinstitution of legal proceedings, the parties elect domicile in the judicialdistrict of Québec

 

**SECTION 16****–****SUCCESSORS**

 

16.1       ThisAgreement shall be binding on the successors, heirs, assignees and legalrepresentatives of the parties.

 

**SECTION 17****–****INTERPRETATION**

 

17.1       ThisAgreement shall be governed by and interpreted in accordance with the laws ofthe province of Québec.

 

**SECTION 18****–****LANGUAGE**

 

The parties have expressly requested that this Agreement be drafted inthe English language. *Les parties ontexpress**ément requis que cette convention d’emploi soit rédigée en anglais.*

 

**IN WITNESS WHEREOF**the parties hereto haveduly signed this Agreement on this 7 day of May, 2007.

 

 
| **ÆTERNA ZENTARIS INC.**         |               |                |
|---------------------------------------|--------------------|---------------------|
|                                  |               |                |
|                                  |               |                |
| By:                                   | /s/ David J. Mazzo |                | /s/ Ellen McDonald |
|                                  |               |                |
| David J. Mazzo, Ph.D.                 |               | Ellen McDonald, MBA |
|                                  |               |                |
| President and Chief Executive Officer |               |                |
|                                       |                    |                     |  |

 

10

----

 

**ANNEX 1**

 

**CHANGE OF CONTROL PROGRAM (the “Program”)**

 

**1.**             **Applicability of the Program**

 

The Executive shall be entitled to the benefit of the Program if bothconditions mentioned below occur:

 

(A)          thereis a **“Change ofControl”**of the Corporation, as defined below; and

 

(B)           TheExecutive’s employment is terminated, within twelve (12) months following aChange of Control :

 

(i)            involuntarily,at the request of the Corporation or its successors, except **“for Cause”**or

 

(ii)           by him, for **“Good Reason”.**

 

**2.**             **Definitions**

 

(A)          Forpurposes of the Program and unless otherwise defined, the capitalized terms usedherein shall have the following meaning:

 

(i)            **“Person”**includesany individual, firm, partnership, association, trust, trustee, executor,administrator, legal personal representative, government, governmental body orauthority, corporation, or other incorporated or unincorporated organization,syndicate or other entity;

 

(ii)           Subjectto the exceptions set out in ScheduleA hereto, a Person shall be deemed the **“Beneficial Owner”**of or to **“Beneficially Own”**(a) anysecurities of which such Person or any of such Person’s affiliates orassociates, as such terms are defined in *National Instrument 45-106 – Prospectus andRegistration Exemptions,*is owner at law or in equity; (b) anysecurities which the Person or any of such Person’s affiliates or associateshas the right to acquire within 60 days (whether such right is exercisableimmediately or after the passage of not more than 60 days thereafter or uponthe occurrence of a contingency or the making of a payment) pursuant to anysecurities convertible into Voting Shares, agreement, arrangement, pledge orunderstanding, whether or not in writing (other than customary agreements withand between underwriters and/or banking group and/or selling group members withrespect to a distribution of securities or pledges of securities in theordinary course of the pledgee’s business); and (c) any securities thatare Beneficially Owned within the meaning of clauses (i) or (ii) ofthis Subsection 2(A)(ii) by any other Person with which such Person isacting jointly or in concert;

 

11

----

 

(iii)          **“Voting Shares”**meansthe common shares and any other securities the holders of which are entitled tovote generally on the election of directors of the Corporation.

 

(B)           Forpurposes of the Program, involuntary termination of employment **“for Cause”**includesthe following:

 

(i)            ifthe Executive commits any fraud, theft, embezzlement or other criminal act of asimilar nature; or

 

(ii)           ifthe Executive is guilty of serious misconduct or willful negligence in the performanceof his duties.

 

(C)           Forpurposes of the Program, **“Good Reason”**means the occurrence, without the Executive’sexpress written consent, of any of the following acts:

 

(i)            amaterial reduction of the Executive’s total compensation (including annual BaseSalary plus Annual Bonus, benefits and number of stock options) as in effect onthe date of this Agreement or as same may be increased from time to time ;

 

(ii)           amaterial reduction or change in the Executive’s duties, authority, responsibilities,accountability or a change in the business or corporate structure of theCorporation which materially affects his authority, compensation or ability toperform duties or responsibilities (such as shifting from a policy makingposition to a policy implementation position);

 

(iii)          aforced relocation; or

 

(iv)          amaterial change in the terms and conditions of this Program.

 

(D)          Forpurposes of the Program, a **“Change of Control”**shall be deemed to have occurredin any of the following circumstances:

 

(i)            subjectto the exceptions set out in ScheduleB hereto, upon the purchase or acquisition, in one or moretransactions, by a Person or one or more Persons who are affiliates of oneanother or who are acting jointly or in concert (as such expressions aredefined in the *Securities Act*(Ontario))(the **“AcquiringPerson”**)****of a beneficialinterest in securities of the Corporation representing in any circumstancefifty percent (50%) or more of the voting rights attaching to the thenoutstanding securities of the Corporation; or

 

(ii)           upona sale or other disposition of all or substantially all of the Corporation’sassets; or

 

12

----

 

(iii)          upona plan of liquidation or dissolution of the Corporation; or

 

(iv)          if,for any reason, including an amalgamation, merger or consolidation of theCorporation with or into another company, the individuals who at the datehereof constitute the Board of Directors of the Corporation (and any newdirectors whose appointment by the Board of Directors of the Corporation orwhose nomination for election by the Corporation’s shareholders was approved bya vote of at least two-thirds (2/3) of the directors then still in office whoeither were directors at the date hereof or whose appointment or nomination forelection was previously so approved) cease to constitute a majority of themembers of the Board of Directors of the Corporation.

 

**3.**             **Payment**

 

In the event that the two (2) conditions mentioned in Section 1above are met, the Executive shall receive, in a lump sum, at the latest withinten (10) days of the effective date of the termination of employment, thepayment of the amounts mentioned in section 7 of the Agreement.

 

Should the Executive die before he has received the full payments, hisestate shall receive, immediately following his death, a cash amount equal tothe unpaid balance, less required statutory deductions.

 

It is understood that the Executive will not be required to mitigatethe amount of any payment hereunder by seeking other employment or otherwise.

 

**4.**             **Release**

 

The Executive acknowledges that the full and complete execution of allobligations undertaken by the Corporation and its successors under the Program,to the extent the Program becomes applicable pursuant to Section 1 of theProgram, constitutes adequate notice of termination and in consideration andsubject to the full and complete execution of all such obligations, theExecutive agrees to grant the Corporation, its affiliated and related companiesand their respective directors, officers, shareholders, representatives,employees, successors and assigns, a full and final release and discharge forall claims, past, present or future, that he has or may have, arising directlyor indirectly from his employment and the termination thereof, whether forprior notice of termination, severance pay, damages in lieu thereof or for anyother reason.

 

**5.**             **General**

 

The Executive’s participation in the Program shall end immediately uponthe termination of his employment with the Corporation or one of its affiliatesfor any reason whatsoever. The Program is for an indefinite term commencing onthe date of this Agreement. Furthermore, the Corporation shall have the rightprior to the occurrence of a Change of Control, in its sole discretion, toterminate the Executive’s participation in the Program at the end of eachtwelve (12)-month period commencing on the date of this Agreement by sendinghim a written notice of termination at least thirty (30) days prior to thefirst anniversary date of this Agreement and of

 

13

----

 

each anniversary date thereafter. For example, the Corporation would beentitled to exercise its discretion to terminate the Executive’s participationin the Program if, as of the date of the notice of termination, there has beenduring said twelve (12)-month period a material reduction in theresponsibilities of the Executive.

 

**6.**             **Successors**

 

The terms and conditions hereof shall bind the Corporation, itssuccessors and assignees.

 

14

----

 

**Schedule A**

 

***Exceptions to thedefinition of “Beneficial Owner” and “Beneficially Own” (Section 2 (A)(ii) ofthe Program)***

 

APerson shall not be deemed the **“BeneficialOwner”**of or to **“Beneficially Own”**any security:

 

(A)          as a result of such security having beendeposited or tendered pursuant to a take-over bid (as such term is defined inthe *Securities Act*(Ontario)) made by such Person or any of suchPerson’s affiliates or associates or any other Person acting jointly or inconcert with such Person until such deposited or tendered security is taken upand paid for;

 

(B)           as a result of entering into an agreement,including a lock-up agreement, pursuant to which it has been agreed that suchsecurity will be deposited or tendered until such deposited or tenderedsecurity is taken up and paid for;

 

(C)           as a result of (a) such Person or any ofthe affiliates or associates of such Person holding such security provided thatthe ordinary business of any such Person (the **“Fund Manager”**)****includes the management of investment funds for others and suchsecurity is held by the Fund Manager in the ordinary course of such business inthe performance of such Fund Manager’s duties for the account of any otherPerson (a **“Client”**);****(b) such Person (the **“Trust Company”**)****being licensed to carry on the business of atrust company under applicable laws and, as such, acting as trustee oradministrator or in a similar capacity in relation to the estates of deceasedor incompetent Persons (each an **“EstateAccount”**)****or in relation to other accounts (each an **“Other Account”**)****and holding such security in the ordinarycourse of such duties for such Estate Accounts or for such Other Accounts; (c) suchPerson (the **“Plan Administrator”**) being the administrator or the trustee of one or more pension funds orplans (a **“Plan”**)****registered under the laws of Canada or anyprovince thereof or the laws of the United States of America or any state thereofand such security being held by the Plan Administrator or the Plan in theordinary course of such Plan Administrator’s or Plan’s activities; (d) suchPerson (the **“Crown Agent”**)****being established by statute for purposesthat include, and the ordinary business or activity of such Person includes,the management of investment funds for employee benefit plans, pension plans orinsurance plans of various public bodies and such security is held

 

15

----

 

bythe Crown Agent in the ordinary course of the management of such investmentfunds; or (e) such Person being a Plan and such security being held by thePlan in the ordinary course of such Plan’s activities; provided, however, thatin any of the foregoing cases the Fund Manager, the Trust Company, the PlanAdministrator, the Crown Agent or the Plan, as the case may be, is not thenmaking or has not then announced a current intention to make a take-over bid(as such term is defined in the *SecuritiesAct*(Ontario)), aloneor by acting jointly or in concert with any other Person, other than an offerto acquire the Voting Shares pursuant to a distribution by the Corporation orby means of market transactions made in the ordinary course of business of suchPerson (including pre-arranged trades entered into in the ordinary course ofbusiness of such Person) executed through the facilities of a stock exchange ororganized over-the-counter-market;

 

(D)          because such Person is a Client of the sameFund Manager as another Person on whose account the Fund Manager holds suchsecurity, or because such Person is an Estate Account or an Other Account ofthe same Trust Company as another Person on whose account the Trust Companyholds such security, or because such Person is a Plan with the same PlanAdministrator as another Plan on whose account the Plan Administrator holdssuch security;

 

(E)           because such Person is a Client of a FundManager and such security is owned at law or in equity by the Fund Manager, orbecause such Person is an Estate Account or an Other Account of a Trust Companyand such security is owned at law or in equity by the Trust Company, or becausesuch Person is a Plan and such security is owned at law or in equity by thePlan Administrator; or

 

(F)           because such Person is the registered holderof securities as a result of carrying on the business of, or acting as, anominee of a securities depositary.

 

16

----

 

**Schedule B**

 

***Exceptions to the definition of “AcquiringPerson” (Section 2 (D)(i) of the Program)***

 

**“ACQUIRING PERSON”**SHALL MEAN ANY PERSONWHO IS AT ANY TIME AFTER THE DATE HEREOF THE BENEFICIAL OWNER OF **FIFTY PERCENT (50%)**ORMORE OF THE OUTSTANDING VOTING SHARES OF THE CORPORATION; PROVIDED, HOWEVER,THAT THE TERM “ACQUIRING PERSON” SHALL NOT INCLUDE:

 

(i)              the Corporation orany corporation controlled by the Corporation;

 

(ii)             any Person whobecomes the beneficial owner of **fifty percent (50%)**or more of the outstandingVoting Shares as a result of one or any combination of: (a) a Voting ShareReduction; (b) an Exempt Acquisition; or (c) a Pro Rata Acquisition;provided, however, that if a Person shall become the Beneficial Owner of **fifty percent (50%)**ormore of the outstanding Voting Shares by reason of one or any combination of aVoting Share Reduction, an Exempt Acquisition or a Pro Rata Acquisition, andthereafter becomes the Beneficial Owner of an additional one percent of anyVoting Shares then outstanding (otherwise than pursuant to an additional VotingShare Reduction, Exempt Acquisition or Pro Rata Acquisition), then, as of thedate that such Person becomes a Beneficial Owner of such additional VotingShares, such Person shall become an **“Acquiring Person”**;****or

 

(iii)            an underwriter ormember of a banking or selling group acting in such capacity that becomes theBeneficial Owner of **fiftypercent (50%)**or more of the Voting Shares in connection with adistribution of securities pursuant to an underwriting agreement with theCorporation;

 

For purposes of the Program, the capitalized terms used herein shallhave the following meaning:

 

(a)           **“Voting Share Reduction”**meansan acquisition or redemption by the Corporation or any corporation controlledby the Corporation of Voting Shares which, by reducing the number of VotingShares outstanding, increases the percentage of Voting Shares BeneficiallyOwned by any Person to fifty percent (50%) or more of the Voting Shares thenoutstanding;

 

----

 

(b)           **“Exempt Acquisition”**meansan acquisition whereby a Person became an Acquiring Person by inadvertence andwithout any intention to become, or knowledge that it would become, anAcquiring Person under this Program and, in the event that a waiver is grantedby the Board of Directors, such acquisition shall be deemed not to have occurredfor the purposes hereof. Any such waiver may only be given on the conditionthat such Person, within 10 days after the foregoing determination by the Boardof Directors or such later date as the Board of Directors may determine (the “DispositionDate”), has reduced its Beneficial Ownership of Voting Shares such that thePerson is no longer an Acquiring Person and such waiver shall only be effectiveif the reduction has occurred within such 10-day period; **[NTD: To consider whethersuch an event can ever occur]**

 

(c)           **“Pro Rata Acquisition”**meansan acquisition by a Person of Voting Shares pursuant to (i) any dividendreinvestment plan, such purchase plan or other plan of the Corporation madeavailable to all holders of Voting Shares (other than holders resident in anyjurisdiction where participation in such plan is restricted or impractical as aresult of applicable law); (ii) a stock dividend, a stock split or otherevent pursuant to which such Person becomes the Beneficial Owner of VotingShares on the same pro rata basis as all other holders of Voting Shares of thesame class or series; (iii) the acquisition or exercise of rights topurchase Voting Shares distributed to all holders of Voting Shares (other thanholders resident in any jurisdiction where such distribution or exercise isrestricted or impractical as a result of applicable law) by the Corporationpursuant to a rights offering (but only if such rights are acquired directlyfrom the Corporation); or (iv) a distribution of Voting Shares orconvertible securities in respect thereof offered pursuant to a prospectus orby way of a private placement by the Corporation or a conversion or exchange ofany such convertible security, provided that such Person does not therebyacquire a greater percentage of Voting Shares or convertible securities sooffered than the Person’s percentage of Voting Shares Beneficially Ownedimmediately prior to such acquisition.

 

2

----